Hyderabad: Rating the City of Pearls as the best place in the country for making investment in real estate, Abhijit Bhave, CEO, Karvy Private Wealth, feels that commercial real estate in the city offers attractive returns in long term.
Hyderabad top city for realty investment
“Hyderabad occupies top place among all cities in India when it comes to investment in commercial real estate and warehousing. The reason for that isthat it is easy to start business here compared to Chennai and Bengaluru. Further, compared to other cities, real estate prices have not gone up in the last five years.
Firstly, there will be good capital appreciation over next several years when compared to other cities in South India. Secondly, there will be higher rental yields. “Investments into commercial properties are expected to deliver an annual rental return of 7-8 per cent and a capital appreciation of 6-8 per cent annually over a 5-10 years horizon,” he said.
Pointing out that real estate market of Hyderabad improved significantly post the political stability and launch of infrastructure projects like metro rail, he said Gachibowli, Madhapur, Financial District and Hi-Tech City areas emerged as the premier areas for commercial real estate.
Bhave said warehousing and logistics emerged as one of the biggest growth areas in recent times. “There have been investments worth Rs 1.25 lakh crore through private equity investments in warehousing space in India since 2014.
Total warehousing space requirement in Hyderabad is nearly 61 million sft. Manufacturing companies account for nearly 70 per cent and rest is driven by consumption led demand satisfied by e-commerce companies,” he explained.
Stating that areas like Jeedimetla, Uppal, Kompally and Shamshabad were emerging as warehousing hubs due to strategic locational advantages, he said warehousing in the city was expected to deliver a rental yield of 10-14 per cent.
On the residential realty, he said growth cycle across the country would begin only after a couple of years. “People from other parts of Telangana as well as from across the country come to Hyderabad and settle here. As the population grows, demand for housing will increase. That will invariably push up prices,” he explained.
He however maintained that people could start searching for a house or residential unit of their choice now and could eventually invest a year or so down the line when demand picked up.
“These investments will offer good returns on a five-six years horizon,” he said. According to him, prices in residential sector in Hyderabad appreciated by almost five per cent. “Prices have gone up by five per cent every year in the last three years.
This is the only city which has seen rise in residential housing prices in the recent times.This trend will continue for next four to five years,” he said. Asked whether affordable housing would be a good investment opportunity, he said the central government was offering tax incentives and interest subsidy under Pradhan Mantri Awas Yojana (PMAY).
“Large number of Indians don’t have a house of their own today. Affordable housing is a concept under which everyone can afford a house. This needs to pick up in the country,” he added.
He further said affordable housing would be a good investment opportunity in India and people would probably look at it as an option. On whether presence of black money declined in real estate post the implementation of RERA and GST, Bhave said Karvy Private Wealth would not track black money in any sector.
“With RERA in place now, the end use of funds is limited to a particular project and there is no way developers can divert funds from one project to another,” he said. As result, delays in completion of projects will be reduced, he added.
He said that in many states, it is mandatory for developers to get registered with RERA. “Eventually, RERA will improve transparency and benefit end users. If that happens, it’s the developers who will benefit,” he said.
Bhave feelsthat luxury housing sector is in bad shape. “Even re-sale activity is in bad shape when it comes to luxury housing. It will take a while, perhaps two to three years, to recover and come back,” he said.
According to India Wealth Report 2018 released by Karvy Private Wealth, individual wealth in real estate went up by 10.35 per cent to Rs 69.56 lakh crore in FY18 from Rs 63 lakh crore a year ago. By the financial year 2023, wealth in real estate is expected to reach 1.22 lakh crore in the country, clocking an annual average growth rate of 11.98 per cent.The total individual wealth grew by 14.02 per cent to Rs 392 lakh crore in FY18.